BHP Billiton, Falconbridge drop Gag Island: Report

Falconbridge Ltd has said it had pulled out of the Gag Island nickel project in Indonesia and would allow a joint venture agreement with BHP Billiton Plc, Reuters reported on Friday.

BHP Billiton said earlier in Melbourne it was reviewing its options for Gag Island, with its estimated 240 million tons of nickel, which had been viewed by the market as one of the company's longer-term sources of growth.

The Canadian nickel giant and BHP signed a joint venture in June 2000 to consider developing Gag Island, but moves by the Indonesian government to protect forests and ban open-pit mining in those areas led to a suspension of the nickel project.

``Following extensive deliberation and in the absence of a resolution to the forestry issue, Falconbridge decided to allow the current date provided in the agreement to lapse and the agreement to terminate,'' Falconbridge spokesman Craig Crosby said.

Canadian mining analysts said although the Gag project was important for Falconbridge's future production, the miner was currently more focused on its Koniambo exploration project in New Caledonia.

``With the continued absence of a resolution to the forestry issue PT Gag Nickel, the joint venture vehicle between BHP Billiton and (Indonesia's) Aneka Tambang, is seeking a suspension of the Gag Contract of Work and will review its options going forward,'' BHP Billiton said. (*)